Stock-Split Watch: Is Microsoft Next?

• Microsoft is 1 of the highest-priced components of the Dow Jones Industrial Average.

• Microsoft is reaping monolithic benefits arsenic request for AI infrastructure keeps rising.

• The banal has gotten a spot pricey, adjacent for the awesome maturation it has been putting up.

• 10 stocks we similar amended than Microsoft ›

Stock splits are breathtaking events that hap from clip to time. While they're not astir arsenic communal arsenic they utilized to beryllium owed to the emergence of the quality of retail investors to bargain fractional shares, companies inactive execute these fiscal maneuvers, and for bully reasons. First, banal splits unfastened up concern opportunities to those who don't person entree to fractional shares. Second, erstwhile a institution has a little stock price, its banal tin beryllium utilized arsenic a signifier of compensation for employees much easily, particularly with options.

When companies denote splits, their shares often bash acquisition a spot of a boost, arsenic these moves make other enthusiasm among investors. They're besides a bullish awesome that absorption expects the conditions that boosted the stock terms successful the archetypal spot volition persist. But fundamentally, a divided does thing to summation the existent worth of the underlying company.

It has been a agelong clip since Microsoft (NASDAQ: MSFT) has engaged successful a banal split, but different 1 could beryllium coming soon.

Microsoft past divided its banal successful 2003. That was a 2-for-1 split, erstwhile the banal was trading astatine a pre-adjusted terms of $50 per share. With Microsoft's banal terms adjacent to 10 times that level now, it could beryllium owed for different banal divided based connected clip alone.

Prior to 2003, Microsoft seemed to beryllium splitting its banal each different year, with 8 occurrences betwixt 1987 and 1999. A fewer of those were 3-for-2 splits, but the astir communal was a modular 2-for-1 split. In those days, fractional shares didn't exist, truthful maintaining an affordable banal terms was important, arsenic it allowed companies to pull a broader radical of investors.

That's not arsenic captious present arsenic fractional shares are disposable done astir each brokerage; however, the quality to bargain them is little communal successful planetary markets. Another origin that could thrust Microsoft to divided its banal whitethorn subordinate to banal options, which companies commonly usage arsenic portion of their compensation packages for higher-level employees. Standard banal enactment contracts are for 100 shares, and 100 shares of Microsoft banal are worthy astir $48,000 now. But if the banal was $48 (as it would beryllium aft a 10-for-1 split, based connected the existent price), that options declaration would beryllium worthy $4,800. That would springiness the institution overmuch much flexibility successful utilizing this signifier of compensation.